Richland prepares to go to court over penny tax dispute
Richland County Council decided Tuesday it is prepared to take the state Department of Revenue to court over the ongoing dispute about the county’s transportation penny sales tax program.
“This council is responsible for the transportation penny that the citizens of this county voted on. We need to protect that transportation penny,” Councilman Bill Malinowski said at Tuesday’s council meeting after council members emerged from a half-hour closed-door meeting in which they received legal advice from an outside attorney. “We, therefore, authorize the Richland County legal representative to take whatever steps are necessary, including litigation, to protect that transportation penny.”
The county’s use of its penny-on-the-dollar sales tax for transportation improvement projects has been under scrutiny by DOR for a year, since the state began an audit last April. In December, DOR director Rick Reames informed the county his department had uncovered evidence of possible corruption and fraud and, he has said, millions of dollars in unbid contracts.
DOR turned over its findings to the State Law Enforcement Division, which apparently continues to investigate possible criminal wrongdoings.
A week ago, DOR told the county it would withhold any further allocations of penny tax revenues until the county changes its accounting procedure to ensure that penny tax funds are spent solely for capital costs of specific transportation projects.
Some council members have questioned DOR’s authority to demand the changes it has and to withhold penny tax funds from the county. The county could seek an order from the judge saying DOR does not have that authority.
Councilman Seth Rose was the only council member Tuesday to vote against pursuing legal action against DOR.
“This can and should be resolved without going into a courtroom,” Rose said.
But DOR defends its right to press the county to reform the penny tax program in accordance with state law.
“It is unfortunate the county is choosing to expend more tax dollars to avoid complying with the law,” DOR spokeswoman Ashley Thomas said.
The county already has agreed to reimburse the penny fund the start-up costs of its Small Local Business Enterprise program that were paid by the penny tax, to change the way it pays the penny program’s public relations costs and to conduct an audit of the penny tax program.
The unresolved issue between the county and DOR is the payment of “program costs” associated with the transportation improvement program, or costs that do not directly relate to a specific transportation project. Examples of these costs include portions of the transportation department’s salaries and the entirety of a public information website that details plans for the program’s projects as well as financial and progress reports.
DOR says these costs should not be paid for from the penny tax fund. Council learned last week it would cost more than $3 million annually from the county’s property-tax-backed general fund to pay those costs separate from the penny tax. The county has enough penny tax funds in the bank to operate the program for about nine months, including repaying about $50 million in debt, without further allocations from DOR.
Reach Ellis at (803) 771-8307.
Other Council actions Tuesday
District 10 election – Council deferred a final decision on whether to spend up to $86,362 to hold a special primary election and potential runoff for former Councilman Kelvin Washington’s vacated District 10 seat until their next meeting, when they hope to have additional questions answered by elections director Samuel Selph.
Over-budget departments – Council gave initial approval to paying more than $1.5 million from the county’s savings account to help the coroner’s office, Alvin S. Glenn Detention Center and Council Services department avoid ending the financial year in deficits.
Hospitality taxes – Council decided it will ask the state Legislature to consider widening the scope of purposes that hospitality taxes can be used for. Currently, the 2 percent tax on prepared meals and drinks in the county can be used only for tourism-related projects, such as the recently failed plans for a water park in the northeast.
Councilman Bill Malinowski, in his motion proposing the negotiation with the Legislature, said, “If we are going to pull money from hard-working taxpayers, we should at least be able to spend it where it’s most needed,” such as on road improvements.
Dam tax districts – Councilman Greg Pearce asked that council consider allowing four more homeowners associations to pursue the creation of special tax districts to pay for post-flood dam repairs. Council recently gave the go-ahead for the Upper Rockyford Lake homeowners association to hold a referendum to decide whether to tax themselves to pay for the costly repairs to their dam.
This story was originally published May 3, 2016 at 8:27 PM with the headline "Richland prepares to go to court over penny tax dispute."